NARANG DIAMOND STONES, Jaipur V. ACIT, BHARATPUR

ITA 235/JPR/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3014 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Keywords: Unexplained investment; Loose papers
• Section: 40A(3)

Judgement Text

1 ITA 235-13 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO. 235/JP/2013 ASSTT. YEAR : 2008-09. M/S. NARANG DIAMOND STONES, VS. THE ACIT, CIRCLE PLOT NO. G-17, INDUSTRIAL AREA, BHARATPUR. BAYANA, BHARATPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANISH AGARWAL RESPONDENT BY : MS ROSHANTA MEENA DATE OF HEARING : 20.06.2013 DATE OF PRONOUNCEMENT : 20.06.2013. ORDER PER B.R. JAIN, A.M. THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 18 .12.2012 OF LD. CIT (APPEALS), ALWAR RAISES THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS GROSSLY ERRED IN SUSTAINING AN ADDITION OF RS. 13,7 37/- BEING THE GROSS PROFIT ON ALLEGED UNACCOUNTED SALE OF RS. 91,777/- ARBITRARILY. 1.1 THAT THE LD. CIT (A) HAS FURTHER ERRED IN IGNOR ING THE FACT THAT ENTRIES NOTED IN LOOSE PAPERS AND SLIPS IMPOUNDED DURING TH E COURSE OF SURVEY WAS ONLY THE ROUGH WORKING AND MEASUREMENTS NOT RELATED TO THE ACTUAL SALE MADE BY THE ASSESSEE AND ALL THE SALE RELATED TO LO OSE PAPERS WERE DULYRECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUN TS, THUS ADDITION OF RS. 13,737/- SUSTAINED BY THE CIT (A) DESERVES TO BE DE LETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 23, 600/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN UNACCOUNTED PURCHASES, AR BITRARILY. 2 2.1. THAT THE LD. CIT (A) HAS FURTHER ERRED IN IGNO RING THE FACT THAT ENTRIES NOTED IN LOOSE PAPERS, SLIPS IMPOUNDED DURING THE C OURSE OF SURVEY WAS ONLY ROUGH ESTIMATE AND MEASUREMENTS AND ACTUAL PUR CHASES NOTED ON LOOSE PAPERS WERE DULY RECORDED IN THE BOOKS OF ACC OUNTS, THEREFORE, ADDITION OF RS. 23,600/- AS SUSTAINED BY THE LD. CI T (A) DESERVES TO BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 54, 789/- (RS. 68526- 13737 TELESCOPED) ON ACCOUNT OF STOCK ALLEGED AS FOUND SH ORT OF RS. 4,60,215/- ARBITRARILY, THUS THE RESULTANT ADDITION DESERVES T O BE DELETED. 3.1. THAT THE LD. CIT (A) HAS FURTHER ERRED IN UPHO LDING THE ACTION OF LD. A.O. IN PLACING RELIANCE ON THE STATEMENT OF SHRI SANJAY NARANG RECORDED DURING THE COURSE OF SURVEY FOR MAKING THE ADDITION ON ACC OUNT OF SHORTAGE OF STOCK WHEN SHRI SANJAY NARANG WAS NEITHER THE PARTN ER OF THE ASSESSEE FIRM NOR HE WAS A RESPONSIBLE PERSON, THEREFORE, TH E ADDITION MADE SOLELY ON THE BASIS OF STATEMENT OF SHRI SANJAY NARANG DES ERVES TO BE DELETED. 3.2. THAT THE LD. CIT (A) HAS FURTHER ERRED IN IGNO RING THE FACT THAT VALUATION OF STOCK DONE BY THE DEPARTMENT DURING THE COURSE OF S URVEY WAS ON LOWER SIDE ON ESTIMATE BASIS WITHOUT REFERRING THE BILLS OF PURCHASES MADE DURING THE YEAR, THEREFORE, ADDITION SO SUSTAINED OF RS. 5 4,789/- DESERVES TO BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 1,3 6,500/- U/S 40A(3) OF THE INCOME TAX ACT, 1961 FOR MAKING THE PAYMENT IN CASH EXCEEDING RS. 20,000/- WITHOUT APPRECIATING THE SUBMISSION MADE A ND EVIDENCE ADDUCED, ARBITRARILY. 4.1. THAT THE LD. CIT (A) HAS FURTHER ERRED IN NOT APPRECIATING THE FACT THAT THE AFORESAID AMOUNT WAS PAID BY THE ASSESSEE ON DIFFER ENT DATES BELOW RS. 20,000/- AND DULY RECORDED IN THE BOOKS OF ACCOUNTS AND ENTRIES NOTED IN LOOSE PAPERS FOUND AND IMPOUNDED IN COURSE OF SURVE Y ARE ONLY ROUGH CALCULATIONS, THUS ADDITION SUSTAINED BY THE LD. CI T (A) OF RS. 1,36,500/- DESERVES TO BE DELETED. 2. BRIEFLY THE FACTS IN GROUND NO. 1 & 3 ARE THAT T HE APPELLANT IS IN THE BUSINESS OF DIAMOND GANG SAW CUTTING AND HAS RETURNED INCOME OF RS. 58,348/- ON 31.3.2009 AFTER THE DATE OF SURVEY ON 18.3.2008 AT ITS BUSINESS PREMISE S. DOCUMENTS REVEALING UNACCOUNTED 3 SALES FOR RS. 91,777/- WERE FOUND BESIDES SHORT STO CK BY RS. 4,60,215/-. THE ASSESSEE HAD NOT MAINTAINED BOOKS OF ACCOUNT ON THE DATE OF SURV EY. THE ACCOUNTS PREPARED SUBSEQUENT TO DATE OF SURVEY WERE VERIFIED AND A DUE NOTE OF T HE ABOVE DISCREPANCIES WERE TAKEN BY THE ASSESSING OFFICER. THE ASSESSING OFFICER AFTER TAKING EXPLANATION FROM THE ASSESSEE PROCEEDED TO ASSESS GROSS PROFIT OF RS. 13,737/- ON UNACCOUNTED SALES OF RS. 91,777/-. HE ALSO ESTIMATED GROSS PROFIT BY DEEMING SHORT STOCK OF RS. 4,60,215/- AS SALES. THE GROSS PROFIT ON SUCH DEEMED SALES WERE WORKED OUT AT RS. 68,526/-. THE LD. CIT (A), HOWEVER, ALLOWED TELESCOPING OF RS. 13,737/- AGAINST THE GRO SS PROFIT WORKED OUT ON DEEMED SALES OF RS. 4,60,215/- AS THE UNACCOUNTED SALES OF RS. 9 1,777/- YIELDING GROSS PROFIT OR RS. 13,737/- WERE TAKEN TO HAVE BEEN EFFECTED OUT OF TH E STOCK SO FOUND AS A RESULT OF SURVEY. 3. I HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. EVEN THOUGH ASSESSEE HAS PROTESTED THAT THE INVENTORY OF STOCK AS WELL A S VALUATION THEREOF HAS NOT BEEN MADE CORRECTLY YET NO RELIABLE MATERIAL HAS BEEN LAID BE FORE ME SUBSTANTIATE HIS CLAIM. THE LD. CIT (A) IS FOUND TO HAVE ACTED WITHIN THE SCOPE OF HIS POWERS IN ALLOWING TELESCOPING OF THE GROSS PROFIT OF RS. 13,737/- ON THE UNACCOUNTED SALES OF RS. 91,777/- WHICH WERE TAKEN AS PART OF DEEMED SALES OF RS. 4,60,215/- ON WHICH THE ASSESSING OFFICER HAS WORKED OUT GROSS PROFIT OF RS. 68,526/-. NO ERROR I S SHOWN IN THE WELL REASONED DECISION TAKEN BY LD. CIT (A). THE RESULTANT ADDITION THUS SUSTAINED BY LD. CIT (A) IN GROUND NOS. 1 & 3 AT RS. 54,789/- DOES NOT CALL FOR ANY IN TERFERENCE. THIS AMOUNT OF TANGIBLE ADDITION, HOWEVER, SHALL BE AVAILABLE TO THE ASSESS EE FOR TELESCOPING AGAINST ANY OTHER ADDITION MADE ON ACCOUNT OF INVESTMENT ETC. GROUND NOS. 1 & 3 IN APPEAL STAND REJECTED. 4. IN GROUND NO. 2 IN APPEAL, THE ASSESSING AUTHORI TY MADE ADDITION OF RS. 80,975/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASES F OUND RECORDED IN THE DIARY. THE LD. 4 CIT (A), HOWEVER, REDUCED THE SAID ADDITION TO RS. 23,600/- AFTER VERIFYING THE FACTS AS CLAIMED BY THE ASSESSEE. 5. I HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE ADDITION SUSTAINED BY LD. CIT (A) AT RS. 23,600/- IS ON ACCOUNT OF PUR CHASES THAT ARE NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT SUBSEQUENTLY PRODUCED IN ASSES SMENT PROCEEDINGS. IT, HOWEVER, REMAINS THAT THE LD. CIT (A) HAS SUSTAINED TANGIBLE ADDITION ON ACCOUNT OF GROSS PROFIT OF RS. 54,789/- ON DEEMED SALES. THIS AMOUNT WAS AVAIL ABLE WITH THE ASSESSEE FOR MAKING INVESTMENT IN THE PURCHASES AS AFORESAID. IN THIS V IEW OF THE MATTER, A SEPARATE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS. 23,600/- W HICH HAD NEXUS WITH THESE EARNINGS WAS REQUIRED TO BE TELESCOPED. AFTER ALLOWING TELES COPING, NO SEPARATE ADDITION AS UNEXPLAINED INVESTMENT OF RS. 23,600/- IS REQUIRED TO BE MADE. THEREFORE, THE SAME IS DIRECTED TO BE DELETED. THE GROUND NO. 2 STANDS ALL OWED. 6. GROUND NO. 4 IN APPEAL, THE LD. CIT (A) HAS SUST AINED ADDITION OF RS. 1,36,500/- MADE UNDER SECTION 40A(3) OF THE ACT ON ACCOUNT OF CASH PURCHASES/EXPENSES ABOVE RS. 20,000/- FOUND MADE AND RECORDED IN THE DIARY FOUND AS A RESULT OF SURVEY AT ASSESSEES PREMISES. 7. ASSESSEES CASE BEFORE THE AUTHORITIES BELOW IS THAT THE EXPENSES AND PURCHASES HAVE BEEN INCURRED ON DIFFERENT DATES THOUGH THE EN TRIES THEREOF IN THE DIARY HAVE BEEN MADE ON LUMP SUM BASIS TOWARDS LIABILITY OF THE ASS ESSEE. THE APPELLANT HAD PRODUCED RECEIPTS FROM THE CREDITORS EVIDENCING THE PAYMENTS MADE ON DIFFERENT DATES WHICH WERE IN ALL CASES WERE BELOW RS. 20,000/- AS DETAILED HE REUNDER :- 5 A. RS. 61,500/- (A) RS. 15,000/- DATED 18.07.2007 (AT THE TIME OF PURCHASE) (B) RS. 15,000/- DATED 19.07.07 (C) RS. 15,000/- DATED 20.07.07 (D) RS. 16,500/- DATED 21.07.07 (AT THE TIME OF FI NALIZATION OF ACCOUNT) --------------- RS. 61,500/- --------------- B. RS. 35,000/- (A) RS. 17,000/- DATED 20.07.2007 (AT THE TIME OF P URCHASE) (B) RS. 18,000/- DATED 21.07.2007 (ON FINALIZATION OF ACCOUNT) --------------- RS. 35,000/- --------------- C. RS. 40,000/- (A) RS. 1,500/- DATED 04.08.2007 (AT THE TIME OF PURCHASE) (B) RS. 19,500/- DATED 05.08/2007. (C) RS. 19,000/- DATED 06.08.2007. --------------- RS. 40,000/- --------------- 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT TH E AUTHORITIES BELOW DID NOT VERIFY THE CORRECTNESS OF THE FACTS FROM THE SUPPLIERS/CRE DITORS AND DREW ADVERSE INFERENCE ARBITRARILY BY MAKING A BALD STATEMENT THAT THE REC EIPTS FROM THE SAID PARTIES AND THE LEDGER ACCOUNT OF THOSE PARTIES HAVE BEEN PREPARED SUBSEQUENT TO THE CONDUCT OF SURVEY AND ARE CONTRARY TO FACTUAL TRANSACTION/PAYMENTS AS NOTED IN THE DOCUMENTS FOUND AND THUS REJECTED ITS CLAIM. 9. ON THE OTHER HAND, THE LD. D/R SUPPORTS THE FIND INGS AND CONCLUSION REACHED BY THE AUTHORITIES BELOW. 10. I HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE APPELLANT HAS LAID ON RECORD THE RECEIPTS FOR PURCHASE OF GOODS AND PA YMENT OF EXPENSES INCURRED FOR WHICH 6 EACH PAYMENT WAS SHOWN TO HAVE BEEN MADE ON DIFFERE NT DATES. ALL THESE PAYMENTS ARE BELOW RS. 20,000/-. THE AUTHORITIES BELOW DID NOT VERIFY THE CORRECTNESS OF THE CLAIM EVEN THOUGH THE RECEIPTS WERE DULY ACKNOWLEDGED BY THE SUPPLIERS OR THE PERSONS WHO HAVE RENDERED SERVICES. MERELY BECAUSE THE RECEIPT S HAVE BEEN OBTAINED ON A SUBSEQUENT DATE OR THE LEDGER ACCOUNT HAVE BEEN PREPARED AFTER THE DATE OF SURVEY, WOULD NOT BELIE THE STATEMENT OF THE ASSESSEE. THE CORRECTNESS OF THE DOCUMENTS WHICH WERE CAPABLE OF VERIFICATION BY THE AUTHORITIES BELOW, COULD NOT BE DISBELIEVED. UNDER THE PECULIAR FACTS AND APPELLANT HAVING DISCHARGED ITS BURDEN, DISALLO WANCE UNDER SECTION 40A(3) COULD NOT BE MADE. I, THEREFORE, DO NOT FIND ANY JUSTIFICATIO N IN MAKING DISALLOWANCE OF RS. 1,36,500/- UNDER SECTION 40A(3). THE SAME IS, THER EFORE, DIRECTED TO BE DELETED. 11. IN THE RESULT, APPEAL STANDS PARTLY ALLOWED AS ANNOUNCED IN THE OPEN COURT IMMEDIATELY AFTER CONCLUSION OF HEARING ON 20.06.20 13. SD/- ( B.R. JAIN ) ACCOUNTANT MEMBER JAIPUR, DATED : 20/06/2013. D/- COPY FORWARDED TO :- M/S. NARANG DIAMOND STONES, BHARATPUR. THE ACIT, CIRCLE BHARATPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 235/JP/2013) BY ORDER, AR ITAT JAIPUR. 7